Competitive Positioning Strategy and Recommendations for Management - Coursework Example

Competitive Positioning Strategy Introduction: When it comes to consumer marketing then the successful one does not start with the unique or distinctive product or a great or exciting idea. Marketing always start with consumers. Consumers are the ones that need or want the product and have certain resources to purchase that product. On the other hand, the consumers do not just purchase the product, they actually buy the complete package of values that are associated with the product or services and are called market offerings. This market offering is comprised of a combination of elements that include product. The services of product, transaction services, package, brand, price, price discounts, advertising, credits terms, sales assistance at personal level, assortment of inventory, transport services and location availability of business or store. Now, creating a perfect combination of all these elements of the market offering, with an right mix and match turn into an appropriate unified and integrated whole develop into the basic challenge for marketing executives of the companies in creating a winning competitive position in the today’s market place for consumers (Lucas & Kirillova, 2011). Hence, in the same context it can be said that for any company that are doing its operations in the market, there are few advantages that can last forever, therefore some of these advantages are need to be protected. For that purpose it is very significant for the companies to identify these advantages and utilize them for their defensible positioning. The underlying report is based on the critically evaluation of this perspective in the context of competitive positioning and competitive advantage and the essential aspect related with the domain of these concepts. 2. Competition: For the companies across the globe, either in the form big multinational corporations or small enterprise, there is no escape for the harsh and ruthless reality of increasing competition. Each market either at local level or at global level has to deal with the competition. In general a company competes for each of its customers or consumer in order to attract them. The companies compete to attaining the attention of the consumers and their involvement in the products and services offered by the company (Darling, 2001). They compete for the efforts and time the consumers have spent in their buying process. They compete for the willingness and readiness to compact with the technical complexities in the products and need for the relevant services. Last but not least companies compete for the sources of funds that the consumers and customers are enthusiast to spend for the acquisition of any goods or services (Nakata and Sivakumar, 1996). 3. Competitive positioning: The concept behind the competitive positioning includes the formulation and establishment of the market offering. In this perspective the positioning is not about what a company does in its market offerings instead positioning is done in the minds of potential and prospective consumers. This is done with the help of various components in the market offering of a company. In due course, the most important challenge faced for developing the successful competitive positioning is that consumers’ minds are limited, they dislike and detest confusion. They are hard to change, they are insecure often lose their focus (Trout and Rivkin, 1996). In this regard, the chief importance is for the ladder that is present in the mind of each and every consumer which is related with each type of market offering. For many people there are only seven points of information detained in the mind of a specific consumer, typically and that includes seven brands in the category of market offering (Ries and Trout, 1986). The number eight is usually out of luck and this all about the point that reflects the limitation of the minds of the consumers and in this manner it facilitates the foundation for other attributes and characteristics of the mind of a consumer. According to Darling (2001), consumers do not like confusion very much and therefore they are inclined to put their focus on the significance of market offering ladder. This results in the establishment of preferences in the consumer’s mind. With that it has been observed that the consumers are likely to buy what they want to have and what they think they should possess. This is the principal reason that develops insecurity which turns out to be a basis foundation for ongoing popularity of fashion related market offering in the market. An all purpose strategic objective in this course that an entirely new market offering ought to generate, that accelerate high interest at consumers’ side rather than the established and existing offerings. On the other hand it also affect that the consumers are particularly more overwhelmed by what they already aware, they know or they buy rather than by something that is comparatively new and they are not much aware of that. Hence, it can be said that extensive or too much extensions of market offering add to a loss of concentration and focus for the established positions in consumer’s mind (John, Loken, & Joiner, 1998). The concept of competitive positioning is very much related with market orientation, this is because of the fact that market orientation provides companies with the insight that leads to attain a competitive advantage and it helps the companies to formulate core competitive strategies. Benson Sharpiro (1988) presented the three core characteristics that can make a business entity oriented to the market, these include: a. Comprehensive knowledge about the market in which the business exist along with the complete knowledge of its existing and potential customers. b. The ability to make tactical and strategic decisions, inter divisionally and inter functionally. c. Having functions and divisions that are well coordinated and synchronized and performed with full commitment. Similarly, Jaworski andKohli (1996) delineates market orientation as the generation and creation of organization wide market knowledge pertain to the present and future needs of the customers, diffusion of intelligence in the departments and the level of responsiveness organization wide. Slater and Narver (1995) have presented a concept of market orientation comprised of three different behavioral components along with two distinct decision criteria, these are Customer orientation Competitor orientation Long term focus Inter-functional coordination Profit objective Hence it can be said that market orientation is regarded with the Resources and Capacity Theory. In the same context Bigné, Vila-López, & Küster-Boluda (2000) presented that the resources and capacity theory is capable to delineate the competitive environment by showing market orientation as a company’s internal factor. Tuominen, Möller, & Rajala, (1997) have used the approach of resources-learning as a connection between the widely accepted approaches of market orientation. These may include behavioral approach and philosophical approach. With these concepts that lie behind the market orientation, it is quite obvious that market orientation have a great influence on the position of the business. Day (1994) affirms that the firms that are market oriented have unique capabilities that let them achieve higher results. In due course, Bigné, Vila-López, & Küster-Boluda (2000) state that the association of market orientation with the generation of market intelligence depicts that market orientation is a genuine and actual capability of an organization and because of that the company is at a better position to identify several competitive advantages and the ability to utilize the resources to achieve those competitive advantage. In the context of Hooley, Broderick, & Möller (1998), an organization select its competitive position to take up and engage itself in the mix of its choices for target market and the differential advantage it is willing to develop in order to secure that target market. According to Porter (1997), there are three main ways that according to that the companies often position their market offerings. Among them the Variety Positioning is entirely product centered. It is the choice of the company to select different types of offerings on the basis of its assets, resources and competencies instead of focusing on the requirements of the customers. A great example in due course can be presented of South West Airline, the company offers low cost, short haul, point to point flight services and does not offer long haul and large airports as it is short of the assets, resources and capabilities to serve that market. Consequently, it can be said that those companies that ignore and overlook the development of its assets and capabilities out itself in big danger and remain left behind the market and the changes it see (Du, Bhattacharya, & Sen, 2007). Need based positioning arises when the company is willing to identify its target market and then formulate its offerings to cater as many needs (product related) as it can. A great example in this context can be taken from large grocery stores that first determine their target market and then bring their market offering to serve the product related needs of the market. Success lies in this approach by developing the capabilities to deal with the range customer needs. Then comes access based positioning, which reflect the identification of segments on the basis of harmony of product or service accessibility. The access based positioning is relied on the availability of those assets, resources and competencies that can be exploitable. With these three ways, there are several different dimensions of positioning. These include price, quality, tailoring, service, innovation or differentiation 4. Defensible Positioning: In order to establish defensible positioning, creating Market Niche is a successful move that companies take into account in formulating their competitive strategy. Market niching is about concentrating on a comparatively small segment of the market with defined and unique needs. And it is the only substitute for the liquidation of the firms (Sveiby, 2001). According to Sudharshan, Kumar and Gruca (1995), niche is defined as a tremendously small market segment that is defensible and justifiable with scarce and limited resources and that is mainly of the distinct need, tastes, preferences and pattern of product usage by the consumers who are part of that niche. In their paper Sudharshan, Kumar and Gruca (1995) have discussed that market niching is related with defending the product with limited resources. In this way, close positioning of the products by the firms while serving the need and wants of the targeted segment endow with defensibility. 5. Competitive advantage: There are two main fundamental approaches that pave a route to create and develop a strong advantage over the competitors. These are the “Cost Leadership” and “Differentiation”, for the formal one, companies seeks to strategies that create attractive offerings for the market in contrast to the competitors, that specifically on the basis of reducing the internal cost of the companies. Equivalence of these offerings look for ensuring the sales of the company at the same time internally, companies focus on pursuing the efficiency margins that lead them towards superior performance as compared to the competitors. On the other hand, differentiation path looks for making the company offering different and distinct in the market, the factor of uniqueness lies in facilitating superior value to the customers (Hunt and Morgan, 1995). 6. Models and Theories for Creating Competitive Positioning: 6.1. Porter Generic strategies: Basically the concept of cost leadership (low cost strategy) and differentiation is brought by Michel Porter in the year 1980; he has presented these terms in relation to the market scope. He reflected that in serving broad market companies need to adopt either low cost or differentiation strategy to gain the competitive edge and in narrow it is preferable that they go for market segmentation by focus strategy (Akan et al., 2006). 6.2. Bowmans Strategy Clock: Cliff Bowman has presented his strategy clock in the year 1996 based on the generic strategies of Porter. The study expanded the ideas of Porter into eight different strategic options, by adopting them companies would be able to attain a competitive edge. The clock is built on two scales including perceived value of the customer at vertical axis and price of the product at horizontal axis (Thomson & Baden-Fuller, 2010). (Thomson & Baden-Fuller, 2010) The clock starts with position 1 which reflects the combination of low price and low value products. This position is kind of a bargain basement and most of the companies do not prefer to be there. The products at this position are not able to produce any differentiated value. The position two in the clock is about having low price products. The companies who have achieved low cost leadership come in this category (Thomson & Baden-Fuller, 2010). At this position it very necessary to maintain a good balance between low profit margins and high volume and companies who are able to build and implement strong strategies are able to gain the market share. Wal-Mart can be taken as the best example for this. The third position is about having moderate price and differentiation strategy where the quality and price of the product are quite satisfactory and the gain the loyalty of the customers (Thomson & Baden-Fuller, 2010). The clock then presents differentiation and focused differentiation and then moves on to the level where companies manufacture standard products and sells at increased priced at this level the perceived value of the customer is high. The clock then moves to low value products but with high prices, in the monopolist situation companies are able to do that when consumers are not left with any other option. The last position is about having low valued products with standard pricing. Pursing this strategy will let the companies lose their market share (Thomson & Baden-Fuller, 2010). 6.3. Resource based theory of competitive advantage: (Grant, 1991) In his paper, Grant (1991) has presented an overview of Resourced Based theory of competitive advantage. The theory has highlighted that for the formulation of strategy resources and capabilities works a foundation. It set the direction for the firm to pursue its business by taking into account the purpose and identity of the company, who are the customers and what are the needs of the of the market that can be served by the business. It also takes into account the profitability of the company against the expenditure and cost that incurs by it and further delineates that resources are the basic foundation for the profitability of the company. (Grant, 1991) In due context, the resource based theorist have proposed that for sustainable strategy it is very important that the strategy must linked with the resources and capabilities of the company. Grant (1991) further stated that the increased rate of change in the external environment of the company is based on its long-term strategy related to the internal capabilities and resources as compared to be based on the external market forces. For instance the manufacturers of typewriter, in 1980 were faced with the revolution of microprocessor. In that situation there were two alternatives that visage the incumbents, either to follow the conventional market and try to obtain the necessary technology to serve the need of the customers for world processing OR to look for other markets to exploit the existing capabilities and competencies (along with the marketing assets of the company in the form of brand reputation) (Hooley, Broderick, & Möller, 1998). 7. Factors Affecting Competitive Positioning: 7.1. Rarity and uniqueness of Products: For companies in order to create a competitive advantage it is important to utilize the resources of organization in a sustainable manner and for that purpose it is very significant to understand the uniqueness and scarcity of the resource. In his book, Graham (2008) has stated that the resources of any company for the manufacturing of any product or bringing up any service have a great contribution in creating customer value. It is then very significant that these resources offer differentiation because if the resources would be unique they will create distinctive competencies for the organization in relation with the core competencies (Collis and Montgomery, 1997). Hence the rarity of resources is very important for sustainable advantage. 7.2. Inimitability: Even though the resources are unique and rare for the organization, there is certain risks attach in order to sustain the distinctive competencies on the basis of these resources. This risk is in the form of long term substitution or imitation of these resources by other players in the market. 7.3. Having a low cost advantage: With these resources there are other aspects that create a competitive advantage for the company. Among them one is reduction in the costs incurred by the company in all of its operations. The cost reduction or being a low cost player in the market is one the greatest competitive advantage that companies are always strive for, the reductions in cost reflect on the prices of the commodities, product and market offerings. There are many ways that can lead the companies towards that goal and among them few of the cost drivers are presented below. However, the advantages for being low cost are very difficult to sustain on long term and requires great determination. 7.4. Impact of learning and experiences: There are many ways that can eliminate the excessive cost and among them one is the facilitation of learning and experience. With learning organizations will be able to increase the efficiency at a certain level of scale. In addition to that it has been found that the companies who have got large market share possess a cost advantage in the industry with experience. Companies can buy experience by hiring the staff that is experienced and enhanced their experience via their training and development. At present, business environment the competitive advantage of the companies that rely too much on achieving economies of scale in the manufacturing side as well as at the distribution side are no more sustainable on regular basis (Moutinho & Phillips, 2002). 7.5. Utilization of capacity: The best utilization of capacity leads to reduce the cost, which turn out to be great advantage for the company in terms of differentiation. There is an apparent and positive relationship between utilization of capacity of the organization and its return on investment (Graham, 2008). 8. Generic Recommendations for Management: In order to attain a distinct competitive advantage in the market, it is very essential for the companies to set their competitive positing. With that the importance shall be given to the understanding of the marketing mix process. Mangers must need to understand that positioning is all about creating a new market offering in the mind and perception of prospective consumers. In doing so, the management of the companies must need to focus on differentiating the market offering of the company from the other market offerings that are in a competitive position. While doing that it should be considered that the consumers need to find an appropriate and meaningful experience that was established in their mind set. Hence, it is recommended that management must need to take below presented steps in the positioning process: i. Setting up an initial marketing offering in the mind and perception of the consumers ii. Differentiating and distinguishing the market offering from other competitive players in the mind and perception of the consumers. iii. Mangers need to build cross divisional teams that generate valuable knowledge about the market and its future expectation. iv. Another move that can be taken by the management is to develop alliances; this will strengthen the recourse base of the company. v. At very initial stage that is in the planning process, the competitive scope need to be set, this will provide the mangers with range of activities that can be done is sustainable and profitable position in the market. Further, developing an efficient, effective and successful strategy for competitive positioning need to start with the thorough research to define and outline the target market. With that the essential and fundamental characteristics of the product and its components that fall in the main priorities of the potential and prospective consumers must be analyzed (Kim and Chung, 1997). In due course the management of the organizations must need to determine how the potential and prospective consumers of a company position and perceived its market offerings in their mind along with the positioning of other comparable offerings in the market that are likely to be of important value for the targeted consumers. 9. Conclusion: With the passage of time, the world is witnessing lot of changes. These changes are not just in tangible form but they are prevailing in intangible forms as well and almost in every walk of life. The above presented report is based on the competitive positioning of the companies. The positioning is something intangible but has great influence over the success of companies. In today’s world, companies compete with each other on the basis of their competencies to gain competitive edge or advantage, among these advantages, few last for long. Hence it is important for the companies to understand the needs and wants of the market and become more market oriented. With that, companies need to be aware of their resources that can be utilized in the best ways to reap out substantial and sustainable outcomes. It is significant that the competitive positioning should be based on the above stated characteristics that include variety based positioning, need based and accessed based positioning. By determining this companies will be at a better position to guide the initiatives for achieving a strong competitive advantage in the market. List of References Akan, O., Allen, R. S., Helms, M. M., & Spralls III, S. A. (2006). Critical tactics for implementing Porters generic strategies. Journal of Business Strategy, vol. 27, no. 1, pp. 43-53. Bigné, E., Vila-López, N., & Küster-Boluda, I. (2000). 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